Financial Constraints, Investment, and the Value of Cash Holdings

David J. Denis · Valeriy Sibilkov

1,382 citations0/0 files storedReview of Financial Studies

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Financial Analysis and Corporate Governance Working Capital and Financial Performance

Abstract

Previous studies report that cash holdings are more valuable for financially constrained firms than for unconstrained firms. We examine (i) why this is so and (ii) why some constrained firms appear to hold too little cash. Our results indicate that greater cash holdings are associated with higher levels of investment for constrained firms with high hedging needs and that the association between investment and value is stronger for constrained firms than for unconstrained firms. These findings imply that higher cash holdings allow constrained firms to undertake value-increasing projects that might otherwise be bypassed. We further find that some constrained firms exhibit low cash holdings because of persistently low cash flows. Overall, our findings support the view that greater cash holdings of constrained firms are a value-increasing response to costly external financing.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 1,382 citations exist upstream.

References

1984Corporate financing and investment decisions when firms have information that investors do not have 1958The Cost of Capital, Corporation Finance and the Theory of Investment 2008The cost of capital, corporation finance and the theory of investment 1997Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?1988Financing Constraints and Corporate Investment 1987Financing Constraints and Corporate Investment 1999The determinants and implications of corporate cash holdings 2004The Cash Flow Sensitivity of Cash

Cited by

2015Policy Uncertainty and Corporate Investment 2013Credit supply and corporate innovation 2015Do Measures of Financial Constraints Measure Financial Constraints?2010Cash holdings and R&D smoothing 2013Refinancing Risk and Cash Holdings 2010Cash Holdings and Corporate Diversification

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.